We have long known that the Chinese government has targeted American carbon composite technology. Carbon composites are extremely useful in aircraft frames because they are lightweight. And they are critically important in jet engines because of their ability to withstand high temperatures. It was General Electric’s carbon composite technology that Yanjun Xu, an official of China’s Ministry of State Security, was seeking to extract that led to his arrest in October 2018, as I described in The New Art of War: China’s Deep Strategy Inside the United States, seen here.
Now comes word in the Wall Street Journal that the Chinese have tried a different but related strategy–investing in a small American maker of recreational airplanes that relies on carbon fiber. As per this article, a Chinese investor controls 47 percent of the shares of Icon Aircraft, which is based in California, and has forced the company to start licensing its technology back to China.
One investor in Icon is Phil Condit, the former CEO of Boeing. He and other investors and board members fear the Chinese will use the technology for military drones. At their request, the Committee on Foreign Investment in the United States (CFIUS), an inter-agency coalition led by the Treasury Department, and the FBI are investigating.
Obviously, the deal should be unwound. But we should not stop there. Unwinding the deal might push the small company into bankruptcy. This is a mistake we make time and time again, with the likes of A123, the lithium ion battery maker, and Solyndra, the solar energy company. If this technology is special enough that it commands the attention of someone such as Condit, the U.S. government including the Pentagon ought to be involved in crafting a solution. It could be in the form of loan guarantees or long-term contracts. It does not have to be an outright grant, which would trigger false claims of “industrial policy” or “corporate welfare.”
The Chinese are able to see the long-term strategic value of technologies in contrast with our financial markets, which see only dollars and cents, usually on a quarter-by-quarter basis. We have to summon the determination and long-term vision to save technologies such as this one if we are going to be able to compete with China for the long haul.
